Why is it a turkey?
How did Nortel Networks go from being the most valuable company in Canadian history to a shadow of its former self, selling off its main businesses in pieces? That story is years in the making and there's not enough space here to tell it. Nortel's slow-motion collapse this year may go down as one of the greatest corporate flameouts in history. Suffice to say, the economic recession did not help the company's fortunes. Nortel posted a $3.41 billion loss and cut 1,300 jobs last November. Nortel then filed for bankruptcy protection on Jan. 14.
Workers were forced to confront losses in pensions and benefits, the tragic human element to the company's demise. The company reported a $2.14 billion loss for the fourth quarter and a $5.8 billion loss for all of 2008. In March, reports first surfaced that Nortel might try and sell off its major units rather than emerge from bankruptcy as a single entity. While the front-office was deciding what to do with the company's businesses, courts in the United States and Canada granted eight top Nortel executives $7.3 million in retention bonuses, even as employees at the bankrupt company were forced to decide between severance pay and their pension plans. Inertia set in. The company's losses continued into the spring and employees in Canada continued to fight with the firm over severance and pension payments.
Then, in late spring, things started getting interesting, and it became clear that Nortel would be broken up. Fellow equipment vendor Nokia Siemens Networks said that it would be interested in picking up some of Nortel's assets. Nortel confirmed its desire to exit its joint venture with LG Electronics. Some former Nortel executives, including former company president Robert Ferchat, tried to engineer a rescue, but it would ultimately be for naught.
Nokia Siemens entered a $650 million bid for Nortel's main CDMA and LTE assets, a bid that would eventually be topped by one from private equity firm (and Nortel creditor) MatlinPatterson. Rival vendor Ericsson eventually swooped in and in late July won the auction with a $1.1 billion bid, giving it the increased presence in the North American market.
Nortel then sold its enterprise solutions unit to Avaya for $915 million, and said it would sell off its GSM/GSM-R businesses as well. The company sold some assets related to the development of its LTE packet core network technology to Hitachi for $10 million, and other companies continue to vie for Nortel's carrier Ethernet business.
It's been a long, sad saga for Nortel. The company has been reduced to selling off its core businesses, as stronger companies feed off it. This makes it the biggest turkey of them all in 2009.